Connecticut businesses dodged major tax increases during the legislative session, but a looming billion dollar budget deficit could still leave a chilling effect on the state's economy, officials said.
As the clock struck midnight May 5, state lawmakers failed to act on a flurry of bills that would have impacted businesses, while also implementing major regulatory reform and job growth initiatives (Read more about the bills and their status).
Attempts to close corporate loopholes, increase taxes on hotels, institute mandatory paid sick days, and tax online retailers all failed to garner enough support from lawmakers.
Business lobbyists stopped short of calling the session a victory, but said it was more successful than years past.
"For the first time in several years the legislature did pass some things that will help spur the economy and grow businesses, while also rejecting a lot of bills that would hurt Connecticut companies," said said Joseph Brennan, senior vice president of public policy for the Connecticut Business & Industry Association.
The economy and Connecticut's business climate were chief considerations in the legislature this session, which resulted in the passage of a comprehensive jobs creation bill.
The measure, which is awaiting Gov. M. Jodi Rell's signature, creates a job creation tax credit for small businesses and authorizes student loan reimbursements for state residents who pursue careers in the life sciences, green technology or health information technology.
It also authorizes angel investor tax credits for individuals investing in new and expanding businesses, and establishes a $15 million revolving loan fund for small businesses.
"It's a step in the right direction," said Andrew Markowski, Connecticut director of the National Federation of Independent Business. "The question remains is it too little too late."
Markowski said the state has had a job creation tax credit on its books for years but geared toward larger companies. The credit will now be extended to limited liability companies and S corps.
But there are major concerns about long-term budget issues. Democratic lawmakers and Rell reached an agreement to close a $700 million budget gap for fiscal 2011 using one-time revenues and postponing a $100 million payment into the state pension fund. But no structural changes were made to deal with a looming $3.8 billion deficit in fiscal 2012.
That could spell future tax increases for Connecticut businesses, unless state tax receipts improve drastically to help fill those coffers.
"I really see the storm clouds coming over Connecticut," Sen. John Kissel, R-Enfield, said during a debate on the Senate floor last week. "It's going to be very difficult to get out of the situation we are getting ourselves in."
For businesses to invest in the state, they need to have confidence in it, Brennan said.
"But when you are facing enormous budget deficits, the specter of higher taxes makes those investments less attractive," he said. "The business community is looking for signals that the state is going to do business in a different way."
Brennan said state government needs to reinvent itself by consolidating agencies, eliminating nonperforming functions, and delivering services in a more cost effective way.
Kissel made his comments during a debate on a bill to renovate John Dempsey Hospital at the University of Connecticut Health Center by building a new patient tower.
Both the House and Senate approved the far-reaching $362 million project, which would also develop a bio-science enterprise zone in Hartford and surrounding communities.
UConn says the plan would create 6,800 new jobs by 2030 and 7,400 new jobs by 2040 by attracting new start-up businesses in bio-science.
Lawmakers also enacted sweeping energy and regulatory reform that aim to reduce electricity rates by 15 percent over the next two years and streamline the permitting process across state agencies.
Besides tax policies, other contentious business-related issues debated under the gold dome this session grabbed plenty of attention.
They included a proposal to institute mandatory paid sick leave days as well as an effort to give Connecticut companies preference when awarding state contracts.
Neither measure passed.
Meanwhile, most of the nearly dozen newly proposed health insurance mandates, including ones that would extend coverage for wigs, prosthetic devices and hearing aids, failed to pass.
Brennan noted that while it's good these bills didn't pass this session, they tend to be brought back year after year.
"That has a chilling effect on the business community," Brennan said. "Just having them out there makes people question whether Connecticut is going to be attractive over the long term."